Zimbabwe urged to rid of bond notes, bad money drives out good money


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It’s not surprising that the US dollar is now in short supply because people are not banking them. So the immediate course of action is to remove the bond notes and then let the US dollar become the core currency but over time we have to bring back the Zimbabwe domestic currency. That’s what will deal with liquidity issues in a big way.

The issue of domestic debt needs to be dealt with through government expenditure patterns. We have 80% of government expenditure going to wages, which is not productive. That picture needs to change to where we begin to see a bigger share going to the more productive and more investing side of government activity.

There are people who lost monies during the dollarisation, that issue has not been completely resolved. We need to go back and look at it and see how best we can resolve it and restore what people lost.

But the ultimate confidence for everyone in the streets in Zimbabwe is jobs. Once credit lines are flowing, once the financial sector is strong enough to start lending again to the manufacturing sector and the productive sector starts creating jobs, then people start to feel confidence is back. Jobs are the silver bullet in any economy.

But going forward there is also need to look at the long term skills development because you need to create youths who are job ready. This can be done by making some reforms in the education sector and bring in a stronger element of vocational training. There is no reason why a child who has finished ‘A’ Levels in Zimbabwe shouldn’t walk away with an artisanal skill.

Or we do a bifurcation that used to happen in the past and Switzerland still practices it.

There are also other issues like infrastructure investment. In Zimbabwe, poor investment in infrastructure and maintenance is dampening growth by as much as 3%. But also we have to innovate because we need smart infrastructure. We have to be creative about our infrastructure; more solar energy, less coal although we have to balance that with job creation so we have to be smart about that.

The health sector as well needs attention. Why don’t we have specialist hospitals? Every other middle class person flies to a different country for treatment for eyes or for diabetes. Those are institutions that could be built in Zimbabwe. There’s a lot of work to do at the sectoral level in order to support the vision of strong, sustained and shared growth.

Zimbabwean government must invite all those skilled Zimbabweans out there to come back and contribute. Some of them don’t have to come back physically: they could stay where they are and contribute through certain structures. I think that Zimbabwe can establish an international economic advisory council where you bring Zimbabweans who are out there who may not want to come back but can advise government or government institutions as to the environment out there and best practices. The different skills can help government in crafting policies and creating an environment that is good and that is really open for business by improving the cost and ease of doing business.

There is no reason why Zimbabwe cannot catch up with its compatriots like Rwanda, in terms of doing business. There is also domestic investors. Sometimes we forget about the role of direct domestic investment as opposed to FDI. DDI is also important. For example we need to create a national venture fund, funded by the banking sector and pension funds to support new and current industries and take equity right across the economic spectrum.

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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